KMPH - KemPharm - http://www.kempharm.com/ Market Cap - 177m SP - $9.39USD as of 03/13/21 I'M NOT A FINANCIAL ADVISOR AND THIS IS NOT FINANCIAL ADVICE. THIS IS STRICTLY AN OPINION BASED ARTICLE. KemPharm is a clinical-stage specialty pharmaceutical company engaged in the discovery and development of proprietary pro-drugs that are designed to be improved versions of widely prescribed, approved drugs. So these guys just received an FDA approval for a methylphenidate based ADHD medication, KP415 AKA Azstarys, and we temporarily saw stock prices rise into the $20 PPS range from the $9 pre approval range. Since then (03/02/21) we've seen prices plummet back to pre-approval range. I'll touch on why I think this is further down. Lets start with financial s. Incredible balance sheet given to us during the 3/11 earnings call. They went from being heavy in debt to turning things around during a round of capital rasing in January. I'm going to skip the steps of how this occurred for the purpose of a more concise article but that info can be found here (https://investors.kempharm.com/news-releases/news-release-details/kempharm-reports- fourth-quarter-and-full-year-2020-financial) As of 03/10/21 KP has 0 debt & 77.6m cash on hand. The float share is 28.3m currently with 38.6m being the fully diluted amount. There are still 9m warrants left to be excersized from the debt restructuring deal with no preferred stock outstanding. KP is partnered with Corium which is owned by Gurnet Point Capital. KP has significant milestone revenue coming for KP415 (and more) so i'm going to break down the arrangement here. KP is eligible for up to 468m in regulatory and sales based milestone payments for KP415 specifically. KP is due 48m for the approval of KP415 and should be on hand by early April. The remaining 420m is based on what CEO Travis Mickle calls a standard sales milestone agreement. The specific markers aren't disclosed. Revenue outside of milestone payments are mid 20's % for US based sales and up to high single %s outside of the US. We are also partnered with Aquestive Therapeutics for their film technology which will see them receive 10% of royalties on anything containing serdexmethylphenidate (our IP chemical). This is a very conservative profit forecast chart for KP415 + ADHD pipeline drugs (KP484 + KP922) made by @78dvdjr87 on stocktwits. Little bit about the product now. KP415 is a methylphenidate based pro-drug to treat ADHD in people aged 6+. KP415 is geared towards the under 18 market where as KP484 will be for treatment in adults. KP415 has a short onset and long duration of up to 13 hours which makes it the best in class label for all ADHD medication currently on the market. In clinical trials it's also shown to have no significant change in appetite or growth which is a game changer in diagnosed school age children. By using their patented LAT technology (https://kempharm.com/technology/) has also significantly decreased the potential for abuse in this and all other pro-drugs created with this tech. The largest competitor in the market space on the amphetamine based side, Vyvanse, patent is about to expire in 2023. KP415 is patent protected until 2037. As of right now, since serdexmethylphenidate is a controlled substance we are waiting for the DEA to complete label approval. The latest this can happen is 90 days from FDA approval. Marketing will begin rolling out via Corium who has taken on all marketing and manufacture in the 2nd half of 2021. Some marketing comparisons to Vyvanse - Vyvanse captured 6% of the ADHD market share when it was released 3rd week of July 2007. In the full year following, 2008, Vyvanse saw market share increase to over 11% in it's first full year of availability. The CEO of KemPharm is Dr Travis Mickle, the primary inventor of Vyvanse. Exciting pipeline - We have multiple drugs in our pipeline as of right now (http://kempharm.com/pipeline-products/) however the one most worth talking about at this time is KP879. This drug is going to be used to treat stimulant use disorder. There is currently no drug available on the market to treat stimulant addiction and this will be the first of its kind to meet an unmet medical need. Clinical trials are to start 2H 2021. This drug has not been optioned yet with GPC having first right of refusal. KP879 is based on serdexmethylphenidate so the chances of this drug being given a fast track designation by the FDA is high considering KP415s approval. This will put KP in a strong place to negotiate terms with GPC or another partner. Some other information I haven't mentioned. KP currently has one currently commercially available drug in APADAZ. This is a pro-drug of hydrocodone and meant to be a less abusable pain killer in the opiate market space. We're partnered with KVK tech on this for up to 50/50 rev share. This is currently being stocked in Alabama. KP is also in an expanded services agreement until 03/22 for consulting on other projects with Corium. This revenue is up to 15.6m paid in quarterly instalments. Now I want to talk a little bit about the marketing team. The marketing team at Corium is comprised of multiple executives that came from Shire. Shire purchased New River Pharmaceuticals in 2007 at the time of the FDA approval for Vyvanse. They bought out NRP for 2.6 billion dollars. Travis was the director of NPR at the time and the prime inventor of Vyvanse. As I mentioned earlier, Vyvanse was a smashing commercial success and generated 2.55b in sales in 2019. When Shire acquired NRP they held the patent for Adderall, another amphetamine based ADHD drug that expired in 2009. Vyvanse patent is expiring in 2023. Perry Sternberg is currently the CEO of Corium and largely the one responsible for bringing Vyvanse to market. So that's the brunt of the research I've done, there's definitely some information missing here that can all be found in SEC filings and company press releases. The final bit of this article I want to mention is pure speculation and that would be the potential for a buyout. I stated earlier I was going to talk about the stock price and why I believe it's severely undervalued and this would be why. Based on the history of the NRP/Shire deal, here are some bullet points of things that are pushing me in that direction. -Shire BO of New River came within weeks of FDA approval of Vyvanse. Adderall patent expiration was 2 years out. Same situation here with Vyvanse patent expiration in 2023 -Similar company structure as New River. Approx same number of employees, KP with a far better balance sheet. -KP paid a fee to repay debt early -Weird statement in ER about confidential business dealings and how KP wants to tell us everything they can but don't have all the info -Commave (owned by Ernesto Bertarelli who funded GPC) owns the trademark(s) to KP415 + multiple other pipeline drugs -Sr management from Shire (that oversaw the NRP BO) have been brought on board with Corium -Sr management from GPC are on the board at Commave -KP owns the trademark and URL to Epyon Therapeutics It's my estimation based on KP415 market forecast and the pipeline for upcoming drugs that the company isn't worth anything less then 3b for a buyout in the short term and could push 4b. On positive news for KP879 this number could easily double going into next year. Buyout figure divided by the number of shares, 38.6m full diluted, brings us to approx $77USD/share at a minimum. I won't personally be selling my stake in this company for less then that. I believe between outstanding warrants being excersized, short sellers and market manipulation this is why the share price is being held down so low. Based on FDA approval for KP415 our floor should be in the $20 range. It's not. This article gives a little more detail regarding things to look out for when a buyout may be looming. https://www.griproom.com/fun/10-signs-your-company-is-about-to-be-acquired
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